Cabinet clears abolition of cesses for GST rollout

Abolition of cesses, including Krishi Kalyan and Swachh Bharat, would leave a dent of around Rs 65,000 crore on exchequer, for which it would have to find resources from the budget.TNN | March 23, 2017, 18:30 IST

NEW DELHI: The Centre on Wednesday decided to abolish 16 cesses and surcharges on union excise and service tax as it prepared the road for rolling out GST from July.

Abolition of cesses, including Krishi Kalyan and Swachh Bharat, would leave a dent of around Rs 65,000 crore on exchequer, for which it would have to find resources from the budget.

The government is hoping that some of the resources would come from higher GST mop-up as more entities would enter the tax net. Given that the Centre and the states are yet to finalise GST rates, it is not clear if consumers eating in restaurants or paying phone bills would be better off or worse after cesses and surcharges are abolished.

While the existing cesses, other than those on petroleum products (which are outside GST), would go away, the GST Council has decided to levy cess on tobacco, pan masala, soft drinks and luxury vehicles for five years to meet the annual compensation requirement. Now, states would also move to abolish cesses and surcharges that they levy.

The decision to do away with existing cesses came along with cabinet approval for amendments to the Customs Act, the Customs Tariff Act, Central Excise Act and repeal of the Central Excise Tariff Act.

In addition, new clauses are proposed to be incorporated in the Customs Act to provide for furnishing of information on import and export of goods to detect under or over-valuation and misuse of export promotion schemes.

Currently, the Goods and Services Tax (GST) is levied at 12 per cent on payments made for under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale.